North American Securities Administrators Association (NASAA) President Joseph P. Borg told a Congressional panel on July 11 that allowing public offerings of private equity and hedge fund management firms without appropriate regulatory protections puts retail investors at risk.

“Due to a lack of transparency, the level of individual and systemic risk attached to these investments remains unknown to the individual investor. Their fee structures and lack of full disclosure obscure real returns. The structure of these new instruments places investors in a vulnerable position, subject to the whims of controlling persons and literally without recourse. In light of the complexity and uncertainty surrounding these instruments, allowing them to be offered to the public without appropriate regulatory protections poses serious risks to investors,” Borg said.

Borg’s remarks came during testimony before the U.S. House of Representatives Committee on Oversight and Government Reform Subcommittee on Domestic Policy during a hearing examining the possible risks presented to retail investors by the recent Blackstone Group L.P. and similar upcoming initial public offerings of the management entities of hedge funds and private equity funds. His testimony is on the NASAA website.